_______________ | |||
FORM 8-K | |||
CURRENT REPORT | |||
PURSUANT TO SECTION 13 OR 15(d) | |||
OF THE SECURITIES EXCHANGE ACT OF 1934 | |||
Date of Report (Date of Earliest Event Reported) – February 2, 2016 | |||
_______________ | |||
THE ULTIMATE SOFTWARE GROUP, INC. | |||
(Exact name of Registrant as specified in its charter) | |||
Delaware | 000-24347 | 65-0694077 | |
(State or other jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |
2000 Ultimate Way, Weston, Florida | 33326 | ||
(Address of principal executive offices) | (Zip Code) | ||
(954) 331-7000 | |||
(Registrant’s telephone number, including area code) |
o | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Number | Description |
99.1 | Press Release, dated February 2, 2016 |
THE ULTIMATE SOFTWARE GROUP, INC. |
By: /s/ Mitchell K. Dauerman |
Mitchell K. Dauerman |
Executive Vice President, Chief Financial Officer and Treasurer |
(Principal Financial and Accounting Officer) |
• | Record 2015 Recurring Revenues of $516.2 Million, Up by 23% |
• | Record 2015 Total Revenues of $618.1 Million, Up by 22% |
• | Record Q4 Recurring Revenues of $141.1 Million, Up by 26% |
• | Record Q4 Total Revenues of $170.7 Million, Up by 26% |
• | Recurring revenues grew by 26% for the fourth quarter of 2015 and by 23% for the 2015 year—both as compared with the same periods in 2014. The increase was attributable to revenue growth from our cloud offering. Recurring revenues were 84% of total revenues for 2015 versus 83% for 2014. |
• | Ultimate’s total revenues for the fourth quarter of 2015 increased by 26%, as compared with those for the fourth quarter of 2014. Ultimate's total revenues for 2015 increased by 22% compared with those for 2014. |
• | Ultimate’s annualized retention rate, on a rolling 12-month basis, exceeded 97% for its recurring revenue cloud customer base as of December 31, 2015, which compares with greater than 96% for the prior year. |
• | Cash flows from operating activities for the fourth quarter of 2015 were $35.3 million, compared with $16.5 million for the same period in 2014. For the twelve months ended December 31, 2015, Ultimate generated $110.8 million in cash from operations, compared with $80.6 million for the twelve months ended December 31, 2014. The combination of cash, cash equivalents, and marketable securities was $129.4 million as of December 31, 2015, compared with $118.5 million as of December 31, 2014. |
• | Ultimate and NetSuite (NYSE:N), the industry’s leading provider of cloud-based financials/ERP and omnichannel commerce software suites, announced a strategic alliance to integrate the UltiPro HCM solution and the NetSuite ERP suite, giving businesses the ability to manage their entire business lifecycle-from financials, supply chain, and customer relationship management to payroll, human resources, and talent management-through two of the industry’s leading cloud solutions. |
• | Ultimate delivered numerous new features in its Summer release, such as a new “at-a-glance” dashboard for predictive metrics on employee performance and retention and a variety of expanded configurability options, such as increased workflow configurability and more flexibility in creating and managing integrations to other business systems through the new intuitive graphical design of UltiPro’s Integration Studio. |
• | Ultimate delivered 180 new features and enhancements in its Winter release, including more than 60 customer ideas. One new feature-set is called “My Leadership Actions,” where UltiPro helps managers become more effective leaders by suggesting potential best-practice actions to take as follow-up to information they learn about team members in predictive analytics. Managers have a choice of 16 different categories of employee engagement, such as Growth Opportunities, Collaboration, Meaningful Work, and Life Change. |
• | To facilitate compliance with The Patient Protection and Affordable Care Act (PPACA, also most commonly known as ACA), Ultimate delivered UltiPro’s ACA Toolkit to our customers before the end of 2015, providing them with the capabilities they need to complete all of the required reporting, forms, and filing for the 2016 deadline. |
• | Ultimate introduced ACA Employer Services for customers who prefer to have Ultimate’s assistance in filing and managing ACA reporting. Ultimate received certification from the Internal Revenue Service’s ACA Information Returns Program, giving us the ability to electronically file compliance documents on behalf of our customers. |
• | Nucleus Research named Ultimate a “Leader” in its “HCM Technology Value Matrix Second Half 2015.” |
• | Forbes magazine ranked Ultimate #7 on its 2015 list of the “Most Innovative Growth Companies.” |
• | Information Week named Ultimate to its Elite 100 list, the Top 100 Business Technology Innovators. |
• | Fortune magazine ranked Ultimate #21 on its “100 Best Companies to Work For” list in March 2015. This honor built upon our #20 ranking in 2014, #9 in 2013, and #25 in 2012, in addition to our previous recognition twice as the #1 medium-size company to work for in America by the Great Place to Work Institute in 2008 and 2009. |
• | Fortune also ranked Ultimate #6 on its “2015 100 Best Workplaces for Millennials,” #1 on its “2015 Best Workplaces for Hispanics and Latinos,” and, also in 2015, #3 for African Americans, #4 for Diversity, #2 for Camaraderie, and #23 for Women. |
• | Bloomberg Business reported in November 2015 that, from a universe of approximately 445,000 companies, Ultimate received the #1 rating for positive-performance outlook from its employees on Glassdoor. Our employees gave Ultimate a greater-than-90% positive business outlook, more than double the Glassdoor company-average of 43%. |
• | Fortune ranked Ultimate #1 on its list of "10 Best Large Workplaces in Technology" in January 2016. |
• | Recurring revenues of approximately $150 million, |
• | Total revenues of approximately $180 million, and |
• | Operating margin, on a non-GAAP basis (discussed below), of approximately 18%. |
• | Recurring revenues to increase by approximately 26% over 2015, |
• | Total revenues to increase by approximately 25% over 2015, and |
• | Operating margin, on a non-GAAP basis (discussed below), of approximately 21%. |
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES | |||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
For the Three Months Ended December 31, | For the Twelve Months Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Revenues: | |||||||||||||||
Recurring | $ | 141,116 | $ | 112,350 | $ | 516,177 | $ | 419,238 | |||||||
Services | 29,534 | 23,069 | 101,681 | 86,165 | |||||||||||
License | — | 11 | 223 | 533 | |||||||||||
Total revenues | 170,650 | 135,430 | 618,081 | 505,936 | |||||||||||
Cost of revenues: | |||||||||||||||
Recurring | 36,554 | 31,635 | 138,538 | 117,609 | |||||||||||
Services | 26,982 | 21,300 | 99,948 | 85,939 | |||||||||||
License | — | 3 | 49 | 91 | |||||||||||
Total cost of revenues | 63,536 | 52,938 | 238,535 | 203,639 | |||||||||||
Gross profit | 107,114 | 82,492 | 379,546 | 302,297 | |||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing | 48,019 | 30,638 | 169,664 | 117,033 | |||||||||||
Research and development | 25,340 | 21,970 | 93,671 | 83,542 | |||||||||||
General and administrative | 19,433 | 12,904 | 72,893 | 47,379 | |||||||||||
Total operating expenses | 92,792 | 65,512 | 336,228 | 247,954 | |||||||||||
Operating income | 14,322 | 16,980 | 43,318 | 54,343 | |||||||||||
Other income (expense): | |||||||||||||||
Interest and other expense | (123 | ) | (77 | ) | (491 | ) | (353 | ) | |||||||
Other income, net | 91 | 86 | 256 | 339 | |||||||||||
Total other income (expense), net | (32 | ) | 9 | (235 | ) | (14 | ) | ||||||||
Income before income taxes | 14,290 | 16,989 | 43,083 | 54,329 | |||||||||||
Provision for income taxes | (5,259 | ) | (5,154 | ) | (20,384 | ) | (9,592 | ) | |||||||
Net income | $ | 9,031 | $ | 11,835 | $ | 22,699 | $ | 44,737 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.31 | $ | 0.42 | $ | 0.79 | $ | 1.58 | |||||||
Diluted | $ | 0.30 | $ | 0.40 | $ | 0.76 | $ | 1.52 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 28,756 | 28,432 | 28,634 | 28,293 | |||||||||||
Diluted | 29,873 | 29,424 | 29,721 | 29,343 |
For the Three Months Ended December 31, | For the Twelve Months Ended December 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Stock-based compensation expense: | ||||||||||||||||
Cost of recurring revenues | $ | 1,675 | $ | 1,471 | $ | 6,303 | $ | 5,495 | ||||||||
Cost of services revenues | 1,307 | 1,136 | 5,017 | 4,446 | ||||||||||||
Sales and marketing | 11,525 | 6,018 | 41,059 | 20,767 | ||||||||||||
Research and development | 1,601 | 1,142 | 6,180 | 4,788 | ||||||||||||
General and administrative | 6,545 | 3,055 | 23,857 | 10,692 | ||||||||||||
Total non-cash stock-based compensation expense | $ | 22,653 | $ | 12,822 | $ | 82,416 | $ | 46,188 | ||||||||
Amortization of acquired intangibles: | ||||||||||||||||
General and administrative | $ | 251 | $ | 278 | $ | 1,034 | $ | 1,139 | ||||||||
Total amortization of acquired intangibles | $ | 251 | $ | 278 | $ | 1,034 | $ | 1,139 | ||||||||
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES | |||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(In thousands) | |||||||
As of | As of | ||||||
December 31, | December 31, | ||||||
2015 | 2014 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 109,325 | $ | 108,298 | |||
Investments in marketable securities | 10,780 | 7,862 | |||||
Accounts receivable, net | 130,106 | 100,218 | |||||
Prepaid expenses and other current assets | 46,804 | 34,788 | |||||
Deferred tax assets, net | 883 | 965 | |||||
Total current assets before funds held for clients | 297,898 | 252,131 | |||||
Funds held for clients | 923,308 | 759,087 | |||||
Total current assets | 1,221,206 | 1,011,218 | |||||
Property and equipment, net | 125,492 | 86,595 | |||||
Goodwill | 24,410 | 25,696 | |||||
Investments in marketable securities | 9,278 | 2,294 | |||||
Intangible assets, net | 5,167 | 6,774 | |||||
Other assets, net | 31,107 | 20,611 | |||||
Deferred tax assets, net | 48,909 | 37,110 | |||||
Total assets | $ | 1,465,569 | $ | 1,190,298 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 7,395 | $ | 7,418 | |||
Accrued expenses | 42,097 | 30,941 | |||||
Deferred revenue | 142,793 | 109,552 | |||||
Capital lease obligations | 4,488 | 3,655 | |||||
Other borrowings | 400 | 567 | |||||
Total current liabilities before client fund obligations | 197,173 | 152,133 | |||||
Client fund obligations | 923,366 | 759,087 | |||||
Total current liabilities | 1,120,539 | 911,220 | |||||
Deferred revenue | 2,934 | 153 | |||||
Deferred rent | 3,719 | 2,368 | |||||
Capital lease obligations | 3,665 | 3,359 | |||||
Other borrowings | — | 400 | |||||
Deferred income tax liability | 646 | 1,049 | |||||
Total liabilities | 1,131,503 | 918,549 | |||||
Stockholders’ equity: | |||||||
Preferred Stock, $.01 par value | — | — | |||||
Series A Junior Participating Preferred Stock, $.01 par value | — | — | |||||
Common Stock, $.01 par value | 333 | 327 | |||||
Additional paid-in capital | 463,609 | 376,609 | |||||
Accumulated other comprehensive loss | (7,829 | ) | (3,590 | ) | |||
Accumulated earnings | 59,627 | 36,928 | |||||
515,740 | 410,274 | ||||||
Treasury stock, at cost | (181,674 | ) | (138,525 | ) | |||
Total stockholders’ equity | 334,066 | 271,749 | |||||
Total liabilities and stockholders’ equity | $ | 1,465,569 | $ | 1,190,298 |
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES | |||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(In thousands) | |||||||
For the Twelve Months Ended December 31, | |||||||
2015 | 2014 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 22,699 | $ | 44,737 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 21,738 | 19,263 | |||||
Provision for doubtful accounts | 4,687 | 2,264 | |||||
Non-cash stock-based compensation expense | 82,416 | 46,185 | |||||
Income taxes | 19,739 | 9,030 | |||||
Excess tax benefit from employee stock plan | (31,859 | ) | (27,499 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (34,575 | ) | (16,806 | ) | |||
Prepaid expenses and other current assets | (12,016 | ) | (5,414 | ) | |||
Other assets | (10,496 | ) | (3,271 | ) | |||
Accounts payable | (23 | ) | 996 | ||||
Accrued expenses and deferred rent | 12,507 | 4,582 | |||||
Deferred revenue | 36,022 | 6,521 | |||||
Net cash provided by operating activities | 110,839 | 80,588 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (50,634 | ) | (38,100 | ) | |||
Purchases of marketable securities | (91,528 | ) | (10,355 | ) | |||
Maturities of marketable securities | 11,711 | 10,377 | |||||
Payments for acquisitions | — | (257 | ) | ||||
Net purchases of client funds securities | (94,306 | ) | (496,860 | ) | |||
Net cash used in investing activities | (224,757 | ) | (535,195 | ) | |||
Cash flows from financing activities: | |||||||
Repurchases of Common Stock | (43,149 | ) | (19,981 | ) | |||
Net proceeds from issuances of Common Stock | 4,701 | 6,208 | |||||
Excess tax benefits from employee stock plan | 31,859 | 27,499 | |||||
Shares acquired to settle employee tax withholding liability | (34,989 | ) | (19,883 | ) | |||
Principal payments on capital lease obligations | (4,810 | ) | (4,082 | ) | |||
Repayments of other borrowings | (567 | ) | (2,690 | ) | |||
Net increase in client fund obligations | 164,279 | 496,860 | |||||
Net cash provided by financing activities | 117,324 | 483,931 | |||||
Effect of exchange rate changes on cash | (2,379 | ) | (820 | ) | |||
Net increase in cash and cash equivalents | 1,027 | 28,504 | |||||
Cash and cash equivalents, beginning of period | 108,298 | 79,794 | |||||
Cash and cash equivalents, end of period | $ | 109,325 | $ | 108,298 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest | $ | 371 | $ | 327 | |||
Cash paid for taxes | $ | 815 | $ | 582 | |||
Non-cash investing and financing activities: | |||||||
Capital lease obligations to acquire new equipment | $ | 5,949 | $ | 5,907 | |||
Stock consideration adjustment recorded for acquisitions | $ | — | $ | (818 | ) | ||
Stock based compensation for capitalized software | $ | 3,018 | $ | 1,730 |
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES | |||||||||||||||
Unaudited Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures | |||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
For the Three Months Ended December 31, | For the Twelve Months Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Non-GAAP operating income reconciliation: | |||||||||||||||
Operating income | 14,322 | 16,980 | 43,318 | 54,343 | |||||||||||
Operating income, as a % of total revenues | 8.4 | % | 12.5 | % | 7.0 | % | 10.7 | % | |||||||
Add back: | |||||||||||||||
Non-cash stock-based compensation expense | 22,653 | 12,822 | 82,416 | 46,188 | |||||||||||
Non-cash amortization of acquired intangible assets | 251 | 278 | 1,034 | 1,139 | |||||||||||
Non-GAAP operating income | $ | 37,226 | $ | 30,080 | $ | 126,768 | $ | 101,670 | |||||||
Non-GAAP operating income, as a % of total revenues | 21.8 | % | 22.2 | % | 20.5 | % | 20.1 | % | |||||||
Non-GAAP net income reconciliation: | |||||||||||||||
Net income | $ | 9,031 | $ | 11,835 | $ | 22,699 | $ | 44,737 | |||||||
Add back: | |||||||||||||||
Non-cash stock-based compensation expense | 22,653 | 12,822 | 82,416 | 46,188 | |||||||||||
Non-cash amortization of acquired intangible assets | 251 | 278 | 1,034 | 1,139 | |||||||||||
Income tax effect of above two items | (7,251 | ) | (4,995 | ) | (27,345 | ) | (18,175 | ) | |||||||
Research and development tax credits | — | — | — | (12,084 | ) | ||||||||||
Non-GAAP net income | $ | 24,684 | $ | 19,940 | $ | 78,804 | $ | 61,805 | |||||||
Non-GAAP net income, per diluted share, reconciliation: (1) | |||||||||||||||
Net income, per diluted share | $ | 0.30 | $ | 0.40 | $ | 0.76 | $ | 1.52 | |||||||
Add back: | |||||||||||||||
Non-cash stock-based compensation expense | 0.76 | 0.44 | 2.78 | 1.57 | |||||||||||
Non-cash amortization of acquired intangible assets | 0.01 | 0.01 | 0.03 | 0.04 | |||||||||||
Income tax effect of above two items | (0.24 | ) | (0.17 | ) | (0.92 | ) | (0.61 | ) | |||||||
Research and development tax credits | — | — | — | (0.41 | ) | ||||||||||
Non-GAAP net income, per diluted share | $ | 0.83 | $ | 0.68 | $ | 2.65 | $ | 2.11 | |||||||
Shares used in calculation of GAAP and non-GAAP net income per share: | |||||||||||||||
Basic | 28,756 | 28,432 | 28,634 | 28,293 | |||||||||||
Diluted | 29,873 | 29,424 | 29,721 | 29,343 | |||||||||||
(1) The non-GAAP net income per diluted share reconciliation is calculated on a diluted weighted average share basis for GAAP net income periods. |